Correlation Between China and Eclat Textile
Can any of the company-specific risk be diversified away by investing in both China and Eclat Textile at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining China and Eclat Textile into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Motor Corp and Eclat Textile Co, you can compare the effects of market volatilities on China and Eclat Textile and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in China with a short position of Eclat Textile. Check out your portfolio center. Please also check ongoing floating volatility patterns of China and Eclat Textile.
Diversification Opportunities for China and Eclat Textile
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Eclat is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding China Motor Corp and Eclat Textile Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eclat Textile and China is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on China Motor Corp are associated (or correlated) with Eclat Textile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eclat Textile has no effect on the direction of China i.e., China and Eclat Textile go up and down completely randomly.
Pair Corralation between China and Eclat Textile
Assuming the 90 days trading horizon China Motor Corp is expected to generate 1.71 times more return on investment than Eclat Textile. However, China is 1.71 times more volatile than Eclat Textile Co. It trades about 0.21 of its potential returns per unit of risk. Eclat Textile Co is currently generating about 0.24 per unit of risk. If you would invest 7,570 in China Motor Corp on October 25, 2024 and sell it today you would earn a total of 530.00 from holding China Motor Corp or generate 7.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Motor Corp vs. Eclat Textile Co
Performance |
| Timeline |
| China Motor Corp |
| Eclat Textile |
China and Eclat Textile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China and Eclat Textile
The main advantage of trading using opposite China and Eclat Textile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China position performs unexpectedly, Eclat Textile can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Eclat Textile will offset losses from the drop in Eclat Textile's long position.| China vs. Yulon Motor Co | China vs. Nan Ya Plastics | China vs. Cheng Shin Rubber | China vs. Far Eastern New |
| Eclat Textile vs. Tong Yang Industry | Eclat Textile vs. Ta Yih Industrial | Eclat Textile vs. Basso Industry Corp | Eclat Textile vs. China Motor Corp |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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